FocusEurope spot PE, PP prices creep higher as mood changes

07 November 2013 12:19[Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) spot prices are creeping higher in Europe, at the same time monthly contract prices are falling, largely in line with the €30/tonne ($41/tonne) drop in the November ethylene and propylene contracts, sources said on Thursday.

The size of the move in spot pricing depends very much on the product in question, and all moves are modest. PP and low density polyethylene (LDPE) spot prices have seen the strongest moves, with linear low density polyethylene (LLDPE) coming close behind.

“My supplier offered me a spot price on Monday that he withdrew on Tuesday,” said one bemused LDPE buyer.

A couple of LDPE producers said their November demand was turning out to be exceptional, the best November in years.

One was already preparing buyers for higher prices.

“We have an order control in place, even as we’re discussing lower monthly price for November,” said a company source. “Extra volumes will now be sold higher.”

The source put the current strength in the LDPE and LLDPE sectors down to a belief that prices had reached the bottom of the current cycle, and low inventories across the board, with both buyers and sellers.

High density polyethylene (HDPE) spot prices are mixed, and imports are affecting sentiment in this market.

Traders are not necessarily seeing the same strength as producers, as buyers stick with their regular suppliers to secure end-year volume rebates, while traders have to compete with low net contracted prices that some large buyers have with their producer.

However, most are seeing an upturn in demand and some slightly higher prices but the picture is patchy.

“My biggest competitors at the moment are local producers,” said one trader who managed to sell LLDPE C4 at €1,250/tonne FD (free delivered) NWE (northwest Europe), from €1,220-1,230/tonne in October.

LDPE sellers are targeting €1,300/tonne FD NWE, but this is not always possible, they said.

PP pricing is also patchy. “I can no longer get prices I was being offered last week,” said a buyer, who said he would have to pay €1,230-1,240/tonne FD NWE if he wanted to get hold of the grade of homopolymer injection he needed, up €30-40/tonne from last week.

Large buyers said they were still able to get hold of material below €1,200/tonne FD NWE.

Some players saw this mixed picture as typical of a market in flux, and many players expect November to be at the bottom of the current cycle and for sellers to attempt to improve poor margins at the beginning of 2014. PE and PP prices have risen in January for the past five years and buyers are aware of this.

Another element that could affect pricing in January is the increase in duty from several established importers, as tariffs rise from 3% to 6.5%.

PE and PP are used widely in the packaging sector. PE is also used for agricultural purposes and PP in the automotive industry.